Apple and Samsung have once again accounted for all of the profits in the smartphone business, with the iPhone taking 57 percent of the market's value.

The latest "value share" data from Canaccord Genuity, provided to AppleInsider on Monday, measures how profitable companies are in the handset space. Together, Samsung and Apple are estimated to have accounted for 100 percent of industry profits in the March quarter.

That number is actually down from the previous quarter, when the two rivals took 103 percent of handset profits. That was made possible because of losses incurred by Motorola, Sony and Nokia ? companies that actually lost money in the December quarter.

"While Apple and Samsung continue to dominate the share of industry profits, improving cost structures and results from other OEMs have reduced Apple and Samsung's combined share to 100% from levels above 100% in the past several quarters," analyst T. Michael Walkley wrote in a note to investors on Monday.

Apple's estimated 57 percent of handset industry profits was down from 72 percent in the December quarter, as Apple saw its operating margins fall from 40 percent to 35 percent. Those shifts were attributed to softer iPhone 5 sales and stronger demand for the legacy iPhone 4 and iPhone 4S models.

Samsung, meanwhile, saw its "value share" grow from 29 percent of the industry's profits to an estimated 43 percent in the March quarter. Samsung's margins also increased slightly, from 20 percent to 22 percent.

Among the major vendors tracked by Canaccord, the only company to carve out a positive value share was LG, which took 1 percent. But LG's success was offset by a negative 1 percent loss seen by Motorola.

The remaining companies in the list essentially broke even in the March quarter, earning them a 0 percent value share: Nokia, BlackBerry, Sony Ericsson, and HTC.

Apple and Samsung are also the only handset companies tracked by Canaccord with any operating margins to speak of. The remaining companies all operate on razor-thin margins, while Motorola is estimated to have actually seen negative 18 percent margins in the March quarter.

Actually the fall in margins for Apple may have been due more to write downs on warranties including 0.5B on China. Samsung's margins will fall in future on handsets, as consumers will continue to tolerate present cheap plastic build on the SG phones when they have HTC One or iPhone alternatives.

1) I'm surprised at just how much Samsung is profiting which means Samsung's higher-end handsets are popular, regardless of how you feel about the company.

2) Blackberry, Nokia and HTC are the only others that aren't showing a loss, and 2 of the 3 aren't using Android. That makes me wonder about the laws that allowed Samsung to blatantly steal from Apple without any real penalties. It's clearly shifted the dominance of the Android market unfairly in favour on Samsung. Not that I can blame Samsung for taking a calculated risk in a market. We can't do anything about that now but we really need better laws to prevent such unfair advantages from happening in the future.

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Actually the fall in margins for Apple may have been due more to write downs on warranties including 0.5B on China. Samsung's margins will fall in future on handsets, as consumers will continue to tolerate present cheap plastic build on the SG phones when they have HTC One or iPhone alternatives.

We're also mostly through a product cycle.

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1) I'm surprised at just how much Samsung is profiting which means Samsung's higher-end handsets are popular, regardless of how you feel about the company.

2) Blackberry, Nokia and HTC are the only others that aren't showing a loss, and 2 of the 3 aren't using Android. That makes me wonder about the laws that allowed Samsung to blatantly steal from Apple without any real penalties. It's clearly shifted the dominance of the Android market unfairly in favour on Samsung. Not that I can blame Samsung for taking a calculated risk in a market. We can't do anything about that now but we really need better laws to prevent such unfair advantages from happening in the future.

Not at all, they make huge profits from cheaper smartphones. They just fool costumers and are integrated so they can still maintain margins. In some countries the Galaxy Ace still is the best selling device. It's hillarious.

Very impressive performance from Samsung. It shows you can also win by making 50+ different handsets per year at each and every price point differentiated in very subtle ways. My guess is the actual R&D on many of their smartphones is actually very small with only minor, cosmetic changes from different handsets.

EDIT:

Also, thank goodness the rest showed very small profits or losses so we don't have to have the crazy discussion of profits adding up to greater than 100% again and wisdom of profit VS loss.

I'm glad to see HTC is at least not at a loss right now and hope they can pull out a decent profit as I like their HW designs.

Quote:

Originally Posted by pedromartins

Not at all, they make huge profits from cheaper smartphones. They just fool costumers and are integrated so they can still maintain margins. In some countries the Galaxy Ace still is the best selling device. It's hillarious.

People just want Samsung.

Huge profits or huge profit margins? A cheap handset at half the price of a high-end handset would need to have 2x the net profit margin to equal its profit. That certainly could be happening but in my experience that's not common.

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I'm glad to see HTC is at least not at a loss right now and hope they can pull out a decent profit as I like their HW designs.
Huge profits or huge profit margins? A cheap handset at half the price of a high-end handset would need to have 2x the net profit margin to equal its profit. That certainly could be happening but in my experience that's not common.

Yeah the HTC One is a nice design.

I like the distinction between profits and profit margins....

If you are selling a lower end phone....you still have to sell more to make the same profit Apple does on one higher end phone.

That's why Apple net profit is higher...

Tallest Skil:

"Eventually Google will have their Afghanistan with Oracle and collapse" "The future is Apple, Google, and a third company that hasn't yet been created."

I'm glad to see HTC is at least not at a loss right now and hope they can pull out a decent profit as I like their HW designs.

Me too.

Quote:

Huge profits or huge profit margins? A cheap handset at half the price of a high-end handset would need to have 2x the net profit margin to equal its profit.

Per device. Or they could sell 2x as many to equal the same total profit.

Separating out the profits vs margins is definitely important. For example, the iPad mini has the same (or possibly even higher) gross profit margin % as the regular iPad, but grosses less cash profit per device.

However, even with lower gross profit, and cannibalizing some of its bigger brother's sales, the mini is viewed as a product that will add to Apple's total profits out of sheer extra volume.

57% profit is still a very impressive number for one company making essentially one model of smart phone but Samsung certainly has closed the gap tremendously. From 72% profit to 57% is pretty steep drop. I would imagine Samsung's profits off of all those cheap phones is rather small and the largest profits are coming from their Galaxy class phones with large displays.

Assuming that these estimates are accurate (we have nothing else to use at this point) since Apple releases new handsets annually you need to factor in a year of profit margins, not a quarter where Apple is at the trail end of their release cycle and Samsung et al. are releasing new products to market. This means that one can't claim Apple is losing ground when it makes a lower percentage of the industry's profits in the Spring just as one can't clam that Apple is increasing their lead on the industry's profits come Autumn.Edited by SolipsismX - 5/6/13 at 9:22am

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There's something wrong with the table presented in the article. I'm fairly confident that Apple made more than eight thousand dollars in Q113. But the table legend does not indicate "hundreds" or "thousands" or "millions". So really, the entire table is meaningless. People are making up the figures they want to see.

These figures don't include the astonishing marketing costs Samsung has. They are hidden in another business.

What business are they hidden in? Has anyone reputable tried to estimate a true operating profit comparable to Apple? Also, can anyone point to a source for these ideas? Several of the comments allude to the concept so it appears it may have merit.

Assuming that these estimates are accurate (we have nothing else to use at this point) since Apple releases new handsets annually you need to factor in a year of profit margins, not a quarter where Apple is at the trail end of their release cycle and Samsung et al. are releasing new products to market. This means that one can't claim Apple is losing ground when it makes a lower percentage of the industry's profits in the Spring just as one can't clam that Apple is increasing their lead on the industry's profits come Autumn.

So what? If Apple wants profits per year to be stable it needs more than one cycle. This is an answer to the "who is making the most profits?" argument.

It is Apple. Just. For now. But down 20% - 200 profit share basis points.

At this rate the answer will be Samsung before the year is out. The answer has to be more than one model of iPhone.

Assuming that these estimates are accurate (we have nothing else to use at this point) since Apple releases new handsets annually you need to factor in a year of profit margins, not a quarter where Apple is at the trail end of their release cycle and Samsung et al. are releasing new products to market. This means that one can't claim Apple is losing ground when it makes a lower percentage of the industry's profits in the Spring just as one can't clam that Apple is increasing their lead on the industry's profits come Autumn.

completely agree. We need year over year data to be able to say anything significant. The table indicates that Apple went from 72% to 57% of market profits. If that were a year over year number it might be an indication of something troubling.

Nevertheless, Samsung's profitability of 43% does strike me as quite significant. I've also noticed quite a few Samsung devices in the hands of sophisticated people. I even have a colleague that went from an iPhone to a Samsung. The alleged reason was the larger screen.

We'll soon find out if the larger screen is a niche market for a few people who have now mostly converted to Samsung or whether this will continue. It will also be interesting to see if Apple produces a larger screen and how people respond to that. Will the Samsung Galaxy folks come back to Apple if their desires are met? What percentage of the market are these people?

These figures don't include the astonishing marketing costs Samsung has. They are hidden in another business.

I thnk that's a very good point. I can study Apple's financials in detail, not Samsung's. I know that Samung's total net profit for all its businesses was $6.5 billion for Q1 2013 from an operating profit of $8 billion. I also know that its IT and Mobile communications segment (which includes its smartphone sales) had an operating profit of $5.9 billion.

But I have no idea what the smartphone segment cost the company to develop, produce, promote, and sell, nor do I have any idea of actual smartphone sales, and I suspect nobody really does outside of Samsung management. Trying to compare Apple financials to Samsung's is quite literally impossible.

I'm curious where all the Samsung "profits" came from, given that just last year Apple had 75% of all mobile profits.

My understanding is Samsung "profits" have come from market growth, particularly in developing countries in the pacific rim. Keep in mind that Samsung can take part of the "profit" pie even if they don't take a single sale away from Apple. If Samsung really is making this much money on growth in developing markets, it begs the question as to whether Apple should be getting into the market. In the past Apple was smart to stay out of the low end market because there was no money in it. If it is true that Samsung is making these kinds of profits, shouldn't apple get into that market?

I'm curious where all the Samsung "profits" came from, given that just last year Apple had 75% of all mobile profits.

Yes. Apple makes profits and Samsung makes "profits" They obviously are making up numbers since Samsung just ships phones and doesn't actually sell them. They put them at ships that they sink at sea or give away all their phones in BOGO/giveaway deals. Using that as a given, Samsung should be operating at a substantial loss.

My understanding is Samsung "profits" have come from market growth, particularly in developing countries in the pacific rim. Keep in mind that Samsung can take part of the "profit" pie even if they don't take a single sale away from Apple. If Samsung really is making this much money on growth in developing markets, it begs the question as to whether Apple should be getting into the market. In the past Apple was smart to stay out of the low end market because there was no money in it. If it is true that Samsung is making these kinds of profits, shouldn't apple get into that market?

Or is there some other explanation for Samsung's profitability????

There is another explanation.
It's a vast conspiracy by the IDC illuminati. Samsung may not even exist for all we really know.

So you didn't accept the 73% last fall? I remember when those statistics were widely celebrated here. With a fall in market share though, the stats become suspect.

If you have evidence of a YoY drop in market share, profit share or profits then please post them but one claiming "Apple sucks" because of a drop from Autumn to Spring are just as foolish as those saying "Samsung sucks" because of a drop from Spring to Autumn after the next iPhone is factored in.

PS: Note that Canaccord Genuity states 72% for 4Q2012 and 69% for all of 2012. Do you know what that means? It means that there were quarters that were less than the 72% which is why the year is less than a single quarter.Edited by SolipsismX - 5/6/13 at 10:18am

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It's the smartphone market and it wasn't all that big when Apple entered it.

That doesn't change the fact that 57% of the market profits is still an insane amount for Apple, given the pundits said Apple would fail in this endeavor. (remember the iPhone as a paperweight argument). However, as a shareholder of Apple, I'm concerned about the direction of the profit share. Where are Apple's profits headed? Since Apple's percentage of the profits were so insanely high in 2011-2012, they had nowhere to go but down. The question now is how far down will they go? Is Apple doomed or is this just a logical correction of an imbalance in market power.

Quote:

Originally Posted by Frood

Yes. Apple makes profits and Samsung makes "profits" They obviously are making up numbers since Samsung just ships phones and doesn't actually sell them. They put them at ships that they sink at sea or give away all their phones in BOGO/giveaway deals. Using that as a given, Samsung should be operating at a substantial loss.

What makes you think Samsung is making up numbers? Giving away phones or dumping them on the bottom of the sea doesn't make a company profitable. The numbers in this chart relate to profitability, not units shipped. Either Samsung is cooking the books, or it is taking a portion of the market that we Apple shareholders would prefer that Apple owned......i.e., the profitable portion of the market.

That doesn't change the fact that 57% of the market profits is still an insane amount for Apple, given the pundits said Apple would fail in this endeavor. (remember the iPhone as a paperweight argument). However, as a shareholder of Apple, I'm concerned about the direction of the profit share. Where are Apple's profits headed? Since Apple's percentage of the profits were so insanely high in 2011-2012, they had nowhere to go but down. The question now is how far down will they go? Is Apple doomed or is this just a logical correction of an imbalance in market power.

What makes you think Samsung is making up numbers? Giving away phones or dumping them on the bottom of the sea doesn't make a company profitable. The numbers in this chart relate to profitability, not units shipped. Either Samsung is cooking the books, or it is taking a portion of the market that we Apple shareholders would prefer that Apple owned......i.e., the profitable portion of the market.

Apple will come down some but they'll still lead the pack, which is far from being doomed.

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I've also noticed quite a few Samsung devices in the hands of sophisticated people. I even have a colleague that went from an iPhone to a Samsung. The alleged reason was the larger screen.

I know quite a few people that have moved to Android as well. These aren't typically longtime Apple customers or Mac users, but those that prefer Windows, and are usually gamers, but that's just anecdotal so i can't comment as to how common those elements are.

I know some that have tried Android from going from no smartphone or from WinCE/BB/Palm and then to the iPhone, as well as from the iPhone to Android and then back to the iPhone, but with the S3 these switchers seem to be enjoying it more. I can't say if it's Android finally being a decent mobile OS, the S3 HW or a combination of both.

I don't think Apple needs a larger iPhone to be competitive but I do think there is a decent market for these large smartphone displays that Apple can take advantage of. If they don't make a new resolution and use their previous methods they'll make a 4.94" display that is 264 PPI (same as Retina iPad), but I'm not sure that's high enough for being Retina on an iPhone, or if that display size is too large. Sometimes you simply can't make an ideal device using other tech you've paid for and mastered like they did with the 7.85" 163 PPI iPad mini.

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I know quite a few people that have moved to Android as well. These aren't typically longtime Apple customers or Mac users, but those that prefer Windows, and are usually gamers, but that's just anecdotal so i can't comment as to how common those elements are.

I know some that have tried Android from going from no smartphone or from WinCE/BB/Palm and then to the iPhone, as well as from the iPhone to Android and then back to the iPhone, but with the S3 these switchers seem to be enjoying it more. I can't say if it's Android finally being a decent mobile OS, the S3 HW or a combination of both.

I don't think Apple needs a larger iPhone to be competitive but I do think there is a decent market for these large smartphone displays that Apple can take advantage of. If they don't make a new resolution and use their previous methods they'll make a 4.94" display that is 264 PPI (same as Retina iPad), but I'm not sure that's high enough for being Retina on an iPhone, or if that display size is too large. Sometimes you simply can't make an ideal device using other tech you've paid for and mastered like they did with the 7.85" 163 PPI iPad mini.

Agreed. My colleague that switched to S3 is a Microsoft guy (literally, he drafts patents for Microsoft). He said he liked the iPhone and didn't have anything against Apple, he just wanted a larger screen. It's hard to say what his real motivation was. I assume it was a least partially motivated by screen size, but there could be more to it. Besides, it is just one data point.

I agree that Apple will survive just fine without a larger screen. However, does that mean they shouldn't do it? I don't envy Tim Cook's position. If he diversifies the screen size, he will be disrupting the simplicity of the supply chain. If it doesn't work out, he will get crucified. If it turns out that the large screen market was critical to continued dominance, he will be crucified for not doing it. Thirdly, he may lose market share no matter which way he does it, in which case he will be crucified either way.

You can see why a CEO like Tim Cook is incentivized to pad his pockets and walk away a wealthy person some day. I'm not saying Tim will do this, but it is obvious to me that the market is going to be unjustly critical of Cook. Apple can't dominate the way they have forever. As the pullback happens, the market feels the need to blame someone and Cook is the obvious person to blame.

Apple is taking 57% of mobile phone industry profits, one of the largest industries on the planet, an industry it entered only a few short years ago. Pretty insane.

Talk about being schooled.

hyperbolic myopia. You're looking at it, therefore it must be the biggest/most important.

This is just a highly automated manufactured, scalable distribution product. AKA it's no different than a mouse trap... everyone needs them but you really don't spend much on them, but if you can make one better, and build it cheaply, you can make a lot of money on it.

mobile phone manufacturing industry probably isn't in the top 100 of the 'planet's' industries.

heck... for every dollar you spend on the mobile phone, you're likely spending 2 on the network. So Telco is bigger than mobile phone manufacturing.

7 of the top 9 Fortune 500 world companies are in petroleum... the other 2... Walmart (retail distribution) and China Electric (power production/distribution).

Toyota and Volkswagen are bigger than your top 2 players in the mobile phone industry..

and to be honest. Food production is the largest industry on the planet. few big players... it's just highly distributed.

in 2012 Samsung eaks in at 20th position on world wide F500, and their primary money maker is TV sets, let alone chip making, and then phones. It's not even the biggest business within it's own portfolio.

apple is 55th on the F500.

Just think about it in terms a family of 4 priority list... Is an smart phone even in your top 20 priorities? a phone maybe, but food, clothing, shelter, heat/energy, education, transportation, savings, and security are probably orders of magnitude 'more important industries' for you to buy into.

Fear of cannibalisation of high end iPhone profits, is sometimes cited as a reason for Apple not producing an iPhone at a lower price point, but Samsung does seem to sell plenty of high end phones despite having lower cost options.

This I wonder, do Samsung list their manufacturing under this « Mobile communications » umbrella of theirs? If so, it would mean that the displays, silicon and memory they sell to their « clients » who are in fact « competitors » (like Apple, and the others) all go towards taking profit from the market indirectly.

I too find it weird that their smartphones would earn them 90 % of their megacorporation-wide profits, and the rest (appliances, computers, electronics and what not) add up to a very small part of their overall profits.

But you have to feel it for all the other guys though. Apple and Samsung are really milking the cow right now!

One explanation is Samsung is supplying components to their mobile phone manufacturers at prices below what they sell to outside companies for. This is a common practice within vertically integrated industries.

I haven't had looked at Samsungs quarterly statement, but I understand their display and memory manufacturing did not have typical profits.

We know Samsung fudges numbers as we found out in their lawsuit battles with Apple. I wouldn't put it past them to artificially prop up their profit margins in the cell phone industry.

If someone that has more access to Samsungs quarterly numbers they could dig a little deeper and correct me.

just waiting to be included in one of Apple's target markets.Don't get me wrong, I like the flat panel iMac, actually own an iMac, and I like the Mac mini, but...........

hyperbolic myopia. You're looking at it, therefore it must be the biggest/most important.

This is just a highly automated manufactured, scalable distribution product. AKA it's no different than a mouse trap... everyone needs them but you really don't spend much on them, but if you can make one better, and build it cheaply, you can make a lot of money on it.

mobile phone manufacturing industry probably isn't in the top 100 of the 'planet's' industries.

heck... for every dollar you spend on the mobile phone, you're likely spending 2 on the network. So Telco is bigger than mobile phone manufacturing.

7 of the top 9 Fortune 500 world companies are in petroleum... the other 2... Walmart (retail distribution) and China Electric (power production/distribution).

Toyota and Volkswagen are bigger than your top 2 players in the mobile phone industry..

and to be honest. Food production is the largest industry on the planet. few big players... it's just highly distributed.

in 2012 Samsung eaks in at 20th position on world wide F500, and their primary money maker is TV sets, let alone chip making, and then phones. It's not even the biggest business within it's own portfolio.

apple is 55th on the F500.

Just think about it in terms a family of 4 priority list... Is an smart phone even in your top 20 priorities? a phone maybe, but food, clothing, shelter, heat/energy, education, transportation, savings, and security are probably orders of magnitude 'more important industries' for you to buy into.

Very interesting point of view - that I share with you (though I hate to nag you, but your F500 sats are coming from year 2011 and have evolved since;)